How Does the DEA Determine the Value of Confiscated Marijuana?

October 8, 2015

In a massive bust in Queens this week, authorities say they seized 3,000 pounds of marijuana, valued by the New York Drug Enforcement Task Force at just more than $3.5 million. That comes out to around $73 per ounce — or, at first glance, more than $100 below market price.

According to the crowdsourced website Price of Weed, black-market, low-quality marijuana costs, on average, $211 an ounce, and the good stuff will run you about $340 for the same amount.

So does this mean that the six men arrested while loading the one-and-a-half tons of marijuana into a cargo van were dealing in the kind of schwag you bought in high school? Maybe not.

The U.S. Drug Enforcement Administration takes into account various factors in valuing seized marijuana. In addition to general market trends, the quality, geography, and the potential seller’s intent in a particular seizure all affect the value put on weed confiscated by authorities, says Eduardo Chavez, a DEA spokesman in Washington D.C. “Because the drug trafficking organizations model themselves after very traditional business practices, and because of our experience and expertise investigating these people,” the DEA has figured out how to price underground marijuana, he says.

Among the DEA’s primary considerations is location, Chavez says. Marijuana in El Paso, Texas, is cheaper than it is in New York and the rest of the Northeast states — not only because of its distance from the source (such as Mexico or Colorado) but also because of the heightened risk of transporting the product across state lines.

The DEA also takes into account whether officials believe the dealer intended to sell the marijuana wholesale or retail — that is, in bulk to other dealers or to individual buyers. Wholesale is cheaper than retail, according to Chavez. The agency also considers the relationship between the buyer and dealer. “Look at [a drug trafficking organization] as a business,” he says. “Businesses give discounts to repeat customers, wholesale customers, while brand new customers pay the highest price.”

Value is also contingent on quality, though drug dealers may say their weed is higher in quality than it actually is, says Chavez. Hydroponic, organic, pesticide-free weed is worth more than everyday, the Mexican-grown, mass-produced product, he says. “Unfortunately [in a black market] these guys have no rules to play by. They can just lie to you, no one is coming after them for falsely marketing their product.” Once the marijuana is confiscated, the DEA tests its quality in a laboratory, Chavez adds.

The New York Division of the DEA generally prices the marijuana it confiscates at $1,000 a pound. They also take into account whether the cannabis is “hydroponic” indoor-grown or “domestic” outdoor grown, says Erin Mulvey, a spokeswoman for the New York division. “Domestic marijuana goes between $800 and $1,200 per pound,” she says, adding that hydroponic weed can fetch “up to $4000 a pound.” According to Mulvey, her office doesn’t test for potency, and that the values are each contingent on specific seizures.

In a black market, the “price discovery process” is more difficult for the consumer, says David Henderson, a professor of economics at Naval Postgraduate School and a research fellow at the Hoover Institution at Stanford University. In a poorly recorded, poorly advertised, underground market, consumers have only a vague idea of how much a product should cost. “When people advertise, consumers put money into a reputation,” Henderson says. “So if [the supplier] screws up, they’ve lost investments. We would get safer marijuana and know what quality we’re getting. If it is underground, you aren’t going to be able to trust the quality as much as if it’s legal.”

In a black market, the prices are often set according to the risk involved in obtaining and transporting the product, as well as overall supply and demand dynamics. However, with legal marijuana sales becoming more prevalent around the country, the prices of marijuana may be declining — there is more supply to meet demand, and in some cases, the risk has changed with legislation. According to Price of Weed, the states that have legalized medical or recreational marijuana also have the lowest street prices. For example, high-quality, black market cannabis in Washington state costs on average $232 per ounce, and $242 per ounce in California.

In the case of this week’s bust in Queens, it is possible the defendants planned to sell their 3,000 pounds wholesale — which is why the DEA priced it so low. “The surprise to me is that they undervalue it,” says Henderson, “I remember years ago when they seized these amounts, they’d always tend to overvalue. They’d always value at retail.” Now, as attitudes around marijuana and legalization are shifting, Henderson calls the recent appraisal “refreshing.”